Whatever your investment objective, chances are you hold some form of bond. Some, like the Vanguard Total Bond Market Index Fund, are designed in such a way as to give exceptional access to income-generating vehicles while minimizing risk to the investor. There are a number of bond mutual funds designed almost specifically to be the core holdings for investors.
Fidelity Total Bond Fund (FTBFX)
The Fidelity Total Bond Fund seeks to provide investors with high levels of current income. The fund uses the Barclays U.S. Universal Bond Index in guiding its allocation decisions and as a benchmark index. The fund invests around 80% of its assets in a wide range of debt securities. It then invests around 20% of its assets in debt securities with lower credit ratings. These lower-quality debt securities have greater risk but also offer higher yields. The fund also engages in derivatives trading, which allows increased leverage but also contains specific types of risk. The types of derivatives include trading swaps, options and futures contracts.
The Fidelity Total Bond Fund has $32.5 billion in assets under management (AUM) with a yield of 3.21% as of October 2018. The debt securities in the fund have an average duration of 5.63 years. The fund is not very volatile. It has over 59% of its assets in AAA bonds with over 40% of assets allocated to U.S. government bonds. It has a reasonable expense ratio of 0.45%.
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
The Vanguard Total Bond Market Index Fund Investor Shares provides broad exposure to U.S. investment-grade bonds. The fund invests around 70% of assets in U.S. government bonds across all maturities. The remaining 30% is invested in corporate bonds. It has a very low expense ratio of 0.15%, which is 80% below the average expense ratio of funds with similar holdings. Vanguard funds are known for having some of the lowest expense ratios in the industry.
The Vanguard Total Bond Market Index Fund Investor Shares has $199.7 billion in net assets with a yield of 3.24% as of October 2018. It has 8.523 holdings with an average effective maturity of 8.6 years and an average duration of 6.2 years. The fund requires a minimum investment of $3,000.
Loomis Sayles Core Plus Bond Fund (NEFRX)
The Loomis Sayles Core Plus Bond Fund seeks to provide higher total returns by investing in quality corporate and U.S. government bonds. The fund has a greater amount of risk than other types of bond funds since it holds fixed-income securities that are high yield and from emerging markets. It has net assets of $6.3 billion with a yield of 2.77% as of October 2018.
The Loomis Sayles Core Plus Bond Fund has a somewhat high expense ratio of 0.73%. It must, therefore, perform well to justify the higher expenses associated with it compared to funds with lower expenses. The holdings in the fund have an effective duration of 5.89 years with an average maturity of 8.48 years. It fund has an average credit quality of BBB, requiring a minimum investment of $2,500.
Metropolitan West Total Return Bond (MWTRX)
The Metropolitan West Total Return Bond Fund is designed to be a core bond fund that outperforms the Barclays Capital Aggregate Index while maintaining a similar risk profile to that index. The Barclays Capital Aggregate Index tracks investment-grade, fixed-income securities.
The Metropolitan West Total Return Bond Fund invests in a wide range of fixed-income securities including derivatives that may be used to hedge risk exposure. The fund has over $71.1 billion in AUM with a yield of 2.78% as of October 2018. It has an expense ratio of 0.67% for the investor shares. The holdings in the portfolio have a lower average duration of 6.13 years and an average maturity of 7.57 years. The lower duration indicates the fund has comparatively less exposure to interest rate risk. The fund requires a rather large $5,000 initial investment.
Dodge & Cox Income Fund (DODIX)
The Dodge & Cox Income Fund seeks to provide a high and stable rate of current income while providing for long-term preservation of capital. Around 80% of assets are placed in investment-grade securities, with up to 20% placed in debt obligations below investment grade. DODIX is a rather safe core holding, even if it doesn't carry the same name brand recognition of Vanguard or Blackrock.
The Dodge & Cox Income Fund has a yield of 2.79% with an expense ratio of 0.43%. It has net assets of $56.9 billion in its portfolio as of October 2018. The fund requires a $2,500 initial investment.